Do Breach Notification Laws Work?

Deirdre Mulligan, professor of information technology law and policy at UC Berkeley's School of Information was one of several speakers at a Security Breach Notification symposium held in Berkeley last Friday. The symposium's directive was to try to answer the question of whether breach notification laws are actually working.

California passed the first data breach notification law in 2003, which quickly became the standard for the rest of the country. While it is clear that the laws have made the public more aware of the vulnerability of their data and have exposed poor security practices at many a business, it is unclear what other benefits the laws have had. Breach notifications should, in theory, reduce incidence of identity theft or fraudulent charges to credit cards if consumers take proper precautions when they receive a notification, as with a fraud alert or a freeze on their credit account because of suspicious transactions.

There are also other questions to ask about what effect breach notifications have on the relationship between the customer and the breached organization. While consumers often express anger and mistrust toward companies that lose their data, it is unclear how often that mistrust actually translates to action.

According to Professor Mulligan, a Ponemon study found that about 20 percent of respondents claimed to have terminated their relationship with a company after discovering the company experienced a breach. But a separate survey of companies found that the percentage of customers who actually do terminate their relationship is less than 7 percent. Both numbers need to be taken with a grain of salt.

"Consumers have a tendency to say they're going to do one thing when they actually do another," says Mulligan, "and companies also can't be relied on to honestly report the numbers of customers they lose from a breach."

See full article in Wired.